Tokenized deposits are the UAE banking system’s answer to stablecoins

Digital money is splitting into two different models, and corporate treasurers in the UAE are getting the full suite of options. We’ve been reporting on the stablecoin rush for months now, with AE Coin becoming the country’s first CBUAE-licensed stablecoin and others from Zand Bank, Rakbank, and IHC, ADQ, and First Abu Dhabi Bank all following suit. But the newest form of digital money being offered to UAE corporates is tokenized deposits — a slightly more familiar alternative.

HSBC’s rollout of tokenized deposits to corporate clients in the UAE is the clearest real-world test yet of that alternative — and of which model treasury teams actually pick once both options are available. Tokenized deposits keep money inside the regulated banking system as a bank liability, just moving on blockchain rails to ensure speed and efficiency. Stablecoins, on the other hand, move money into a privately issued token that lives off any single bank’s balance sheet entirely.

The benefit? You’re getting a tokenized form of commercial bank money that “represents a direct claim on the bank and operates within the same regulatory and banking framework as traditional bank deposits,” Kyle Boag, regional head of global payments solutions at HSBC MENAT, tells EnterpriseAM.

Tokenized deposits stay fully inside the prudential rules governing commercial banks — meaning access to central bank liquidity facilities and deposit protection that stablecoins don’t necessarily carry.

Stablecoins lean on reserve assets and secondary-market mechanisms to hold their value instead — a model that depends entirely on the market trusting the issuer actually holds what it claims. When that trust wavered for USDC in 2023 — after its issuer’s bank reserves got caught up in Silicon Valley Bank’s collapse — the token briefly lost its peg, recovering only after US regulators stepped in to guarantee those bank deposits. Tokenized deposits don’t carry that specific risk, because the backstop is already built into the banking system they run on.

That’s not to say UAE-licensed stablecoins are unregulated — CBUAE rules already require issuers to hold reserves 1:1 in liquid assets and file audited whitepapers, and many of the regulated stablecoins in the UAE — Rakbank, Zand AED, and the FAB/ADQ/IHC token — are issued by banks directly anyway, though AE Coin and USDU are issued by non-bank entities.

Much like stablecoins, treasury, not retail, is where demand lies

“The strongest use cases we see today are treasury centralization and real-time cross-border payments,” Boag says. That’s because tokenized deposits let funds move “24/7, all year round, without being constrained by traditional payment cut-off times,” he adds. That’s instead of the settlement windows that give treasury teams hours to manage liquidity positions before a traditional payment finalizes, per the IMF.

GO DEEPER- We’ve tracked the demand side of this before: business use — trade finance, remittances, and B2B settlement — is what’s actually driving stablecoin adoption in the UAE, with volumes up over 40% y-o-y in 2025. HSBC’s tokenized deposits are the banking system’s answer to that same appetite for faster digital money, without handing deposits over to someone else’s ledger.

But adoption, for now, looks narrow by design. HSBC expects the earliest users to be “digitally mature organisations, particularly those that have already invested in modern treasury infrastructure and technology-enabled financial operations,” Boag says.

HSBC doesn’t see this as a fight it needs to win

“We see tokenized deposits and stablecoins as complementary forms of digital money rather than competing solutions,” Boag says, adding that the two “may serve different customer needs and use cases.” The real potential, in his telling, isn’t picking a winner — it’s interoperability: letting different forms of digital money talk to each other as adoption grows.

Our take: HSBC — and stablecoin issuers — are both moving in step with the UAE government and financial regulator, whose goal is to modernize its payment infrastructure and to build a cashless, digitally-native financial system. The underlying goal? Becoming a hub that can move money in and out, in any direction, as fast and cheaply as possible.